Tariff Policy - Golden age of trade

Foreign trade in manufactures yoked U.S. diplomacy and economics together
after the Civil War. This was a period of tremendous economic growth in
the country, and in U.S. and European expansion overseas. American
production of industrial goods gradually replaced raw materials in
significance as exports, and imports of manufactures slowly declined. This
pattern, as the United States moved into markets controlled by Britain and
other commercial powers by the 1890s, lent tariff policy a new and
important dimension. The country's dynamic domestic economy,
combined with its emerging rapprochement with Great Britain and increasing
reach abroad, transformed tariff policy into a diplomatic tool geared
toward enhancing American competition. Before this time, the aim of tariff
policy was to defend U.S. interests through reciprocity treaties. After
the sectional conflict, tariff policy was an indicator of American
economic and political muscle that projected the nation's power
abroad, although it still remained enmeshed in domestic politics.

From the 1870s onward, more farmers and manufacturers had a stake in
overseas trade than ever before, and more producers were devastated by
recurrent bank panics and depressions. These caused gluts on domestic
markets and thus dropped prices repeatedly throughout the Gilded Age.
Producers pushed the government to expand U.S. foreign trade with
appropriate trade policies. Historians, led by Marxist scholars, have
emphasized the "glut theory" as the driving force behind
tariff diplomacy of this time. They argue that policymakers sought to
unload surpluses at home on world markets by creating an informal empire
of commerce and investment throughout Latin America and into the Pacific
and Asia. In this view, tariffs were part of a foreign economic policy
that served the purposes of American business, which sought to dominate
economies at home and abroad. Opponents of such economic determinism point
out that U.S. business support for a lower tariff was not consistent or
uniform. Some manufacturers sought exports as their salvation to
overproduction but most focused on the home market. It is more evident
that the executive branch managers of diplomacy saw great advantages to a
tariff policy based on trade liberalization, and so acted accordingly to
make this policy amenable to America's emerging foreign interests.

The debate over the tariff did not cease, by any means. Tariffs began to
rise as early as 1861, as the southern coalition exited Congress, leaving
the Republican Party, long a supporter of protectionism, in control of the
presidency and at least one house of Congress for most of the period until
1913. In addition, powerful northern manufacturers demanded protection
from imports. Farmers in particular campaigned against high duties, which
forced them to buy in a pricey domestic market but sell in an unprotected
one. By the 1890s, the Populists had taken up the cause of trade
liberalization, focusing their wrath on the tariff as a punitive
instrument to farmers and labor. But protectionist views were politically
appealing. In addition, the tariff was a highly complex issue, buffeted by
many interest groups, each seeking a slight revision in rates or valuation
methods to gain an edge in cutthroat competition in the various fields
over their equivalents abroad.

The low-tariff advocates in the business and diplomatic community tried to
bypass the entrenched interests in Congress by taking up the cause of a
tariff policy fashioned to bolster America's international power.
Liberal traders lobbied for tariff reform (lower customs rates) as part of
a package of foreign policy initiatives, although they just as strongly
appealed on economic grounds by denouncing protectionist monopolies that
operated behind a wall of tariffs while workers and farmers were exposed
to free-trade winds. These liberal traders included in their calculations
for lower customs duties the expansion of overseas commerce, the
construction of U.S. dominated transportation systems (with priority given
to building a trans-isthmian canal through Central America), and a bigger,
updated, and stronger navy. Liberal trade advocates, including southern
legislators, diplomats, and presidents, welcomed British commercial
prowess as confirmation that freer trade brought riches and diplomatic
leverage. A rising power like the United States, they argued, should
follow the British lead in liberalizing tariff restrictions. Richard
Cobden, Britain's chief opponent of the protectionist Corn Laws,
had successfully crusaded for a free-trade strategy on the notion that
increased commerce would boost prosperity and peace. American liberal
traders agreed. Besides, a protectionist tariff policy would merely
provoke retaliation from Europe. Such a response would not only lead to
political and even military conflict abroad, but it would hurt American
producers.

In what became the traditional State Department approach, bureaucrats in
the diplomatic branch of the government, such as Worthington C. Ford of
the Bureau of Statistics, promoted the idea that a liberal tariff policy
would help Americans export production surpluses by encouraging Europeans
to treat U.S. commerce on a reciprocal basis. The State Department no
doubt suffered from the passivity of presidents of this time; Congress was
the dominant branch, with the result that tariff policy remained pointed
in a protectionist direction. Still, trade expansion—and thus
tariff liberalization—held sway over the State Department, the
agency responsible for negotiating international tariff treaties. Thus,
duties, although of secondary interest to Secretary of State William
Seward, nonetheless played a role in his ambition for territorial
annexation across the Pacific, for he stressed that political expansion
succeeded trade expansion. Tariff reciprocity accords promoted the latter.
James G. Blaine attempted in 1881 to combat Britain's dominant
position in major trade items in the hemisphere by creating a hemispheric
customs union on the model of the German Zollverein, but the Latin
Americans rejected him in 1889 during his service as secretary of state.
He turned instead to reciprocity treaties to promote commerce. Later
secretaries of state advocated trade growth abroad; most adopted
reciprocity as the best means to accomplish this end.